describes consumer credit.

1. SAGNIK CHAKRABORTY
LL.M (BURDWAN UNIVERSITY)
CONSUMER CREDIT

2. What is consumer credit?
 Consumer credit is personal debt taken on to
purchase goods and services. A credit card is one
form of consumer credit.
 Although any type of personal loan could be
labeled as consumer credit, the term is usually
used to describe unsecured debt that is taken on
to buy every day good ands services. It is not
usually used to describe the purchase of a house,
for example, which is considered a long-term
investment and is usually purchased with a
secured mortgage loan.

3.  Consumer credit arose in order to cover the
satisfaction of a consumption need of people who
do not have financial capacity to cover their cost
in cash. This form of access to consumption is a
loan granted to purchase a good or service for
personal use in certain terms.
 In country like India, this form of access to
consumption is highly in demand since the
economy is consumption based.
 The function of consumer financing is to allow
consumers to defer payment of purchases and
pay with interest at a predetermined and
sometimes variable interest rate.

4.  Consumer finance by nature is bank credit cards,
department store or self-service cards, although
the common types of consumer finance are
varied, including motor vehicles, personal
installment loans, and some retail installment or
lease-to-own loans.
 With respect to home mortgages, they are
typically not considered in this category due to
the nature and specific regulation of mortgage
lending industry.
 Today, consumer credit is offered by financial and
non-financial institutions.

5. TYPES OF CONSUMER
CREDIT
REVOLVING
CREDIT
• The line of credit is always open.
• Given to consumers on high interest rates as any
collateral does not secure the credit.
INSTALLMENT
CREDIT
• Type of close-end credit.
• Only allow to buy one specific thing.
NON-
INSTALLMENT
CREDIT
• Difference b/w installment and non-installment
credit is that the consumer can pay back the
whole credit amount in one lump sum payment.

6. ADVANTAGES
 It allows consumers to use the products and
services, while still paying for them without having
to wait until they have saved enough money for a
cash purchase.
 Credit cards and retail cards allow consumers to
shop online easily.
 Paying off financing successfully builds a
favourable credit history, allowing consumers to
take advantage of their financing opportunities.
 Access financing relatively easily and quickly,
without having to present documents as collateral
that you often don’t even have.

7.  The variety of things you can acquire with this
type of financing is very wide, ranging from
household items to personal items.
 The down-payment and the installments that are
given apparently are not high.

8. DISADVANTAGES
 The final price of the item obtained through
financing goes up considerably.
 The interest rate can be high and is information
that is not given to the client if the client does not
ask for it.
 They also charge other fees and commissions,
such as account management, annuity,
insurance, etc.
 The payments last so long that in many cases the
payment is not finished.
 Since the payments are not made, in many cases
it is necessary to proceed with the seizure.

9.  One of the disadvantages of using this type of
financing is that it reduces the ability to save
money, which can leave families vulnerable if
financial emergencies arise.
 A damaged credit rating on our credit bureau due
to unpaid financing can negatively affect a
consumer’s ability to obtain new personal or
business financing.

10. Thank you